The Impact of Tax Structure on Investment: An Empirical Assessment for OECD Countries
REM Working Paper, 058-2018
13 Pages Posted: 6 Dec 2018
Date Written: November 9, 2018
In the present empirical analysis we try to assess the impact of taxation on investment growth. In particular, and by using gross fixed capital formation as a proxy for investment, we intend to evaluate the impact of the taxation structure in investment dynamics, in a short and a long-run perspectives. This empirical exercise was conducted for all OECD countries, during the 1980-2015 period. Through panel data econometric techniques, we find optimal tax-investment threshold values, specially higher for short-term than for long-term evolution. Also, we find optimal income taxation rounding 9%, in percentage of GDP, an average optimal value 12.7% for consumption taxes to promote annual investment growth.
Keywords: Investment Growth; Tax Systems; Fiscal Policy; Optimal Taxation
JEL Classification: D25; E62; H21; O47
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